The 18th-22nd is post-OPEX week in October. As we can see below, the histogram of expected return for that week is bearish. However, due to the great momentum, I think that the index will be higher at the end of the week after a down Monday opening. This will be an opportunity to add to positions. Buy on the Monday close.
The sentiment is bearish as the annual low for the year, October 27th, approaches. Expect higher prices into yearend.
Average Daily Expected Return of S&P 500 in Post-OPEX Week in This Month (1985-2020)
To select some stocks for short-term trades, the following strategy is employed. The best-performing stocks in the week from the 15th to the 22nd with at least 20 years of price data are calculated and are presented below. The stocks are ranked by the percentage of time periods in which the stock rose. US Bancorp is first, having risen 77.27% of the time in this week. The return has been 2.01% and the expected return (the product of the first two numbers) is 1.55%. The stock has been trading for 22 years.
Best Performing S&P 500 Stocks from October 15th through 22nd
From this list, the stocks are screened for relative strength and by dynamic cycles. The latter term refers to the most active cycles that are generating profits now.
US Bancorp is a buy for the week. Its daily, weekly, and monthly cycles are rising. Relative strength is strong, and price is oversold on a daily basis. These shares are likely to rally back to and past the $62.5 area. In fact, October (up 74% of the time) and November (up 68%) have been the two most profitable months to hold this stock. October 7th has been the average low for this month.
Waste Management is due for an above-average week. Relative strength has been strong and the weekly cycle is rising. Five of the last six weekly cycle buy signals have been profitable. The stock is likely to rise closer to $165.